Energy and Healthy Ambitions as Catalysts for Healthy Growth
With the chemical industry posting phenomenal Q1 numbers, it’s clear that the worst of the economic crisis is over. The same goes for chemical distributors in Europe, who will be gathering in Vienna June 6–8 for the annual European Association of Chemical Distributors (Fecc) congress. This year’s motto, “Turning challenges into opportunity” sums up the strategy many Feccmember companies employed when the going got rough. Brandi Schuster asked the leaders of several Fecc member companies about the lessons they learned from the downturn; their take on continuing consolidation within chemical distribution; and the trends that will shape the market over the next 12 months.
Read the vision of our Board Member Pavel Kratochvil:
The most significant changes within the chemical distribution have been the exact following or copying of all changes in the chemical industry, as well as changes in consumer behavior. Consumer behavior has been dominated by uncertainty with regard to the future and future economic developments. Therefore, slow down of consumption has been followed by slow down of production, followed by cost reduction – or at least cost awareness. At least this point was very positive, and we have learned a lot from this. It forced us to look in the mirror and see where and what we can do much more efficiently and practically. In many cases, we came back to the original roots – to make business simple. This goes for production companies, distributors and even for our private lives.
The gap between the three largest players nd everyone else within chemical distribution is indeed significant. It is significant in the size of the business, in the revenue, global coverage and other parameters, but one can question if we are not comparing apples with oranges. In the current worldwide economic recovery, we can see increased appetite of the huge chemical companies for investments, and owners of the three biggest distributors striving for further acquisition. This is driven by pure financial criteria, meaning showing either growth of shares on the stock exchange or showing expected return on invested capital.
Medium-sized distributors, often still family owned, have different roles and ambitions, such as being a long term global partner for their principals and strengthening their position while making a profit out of it. We haven’t seen a lot of mergers, acquisitions or other alliances among these medium-sized distributors yet, but some of them shall step out and will become visible very soon. The real smallest ones, particularly real local ones, will hardly survive and stay alone, unless they are very specialized or even niche in the certain segments or region.
Mergers among the biggest chemical producers will create big and strong groups, affecting the way they select their distributors. They will require pan-European and non conflicting distributors. The organic growth of top distributors certainly has its own limits, following stronger or weaker economic growth. Therefore the biggest growth model needs to come through acquisitions. This will, however, create at the same time more and more conflicts of interests for the principals.
Barentz strongly believes in a nonconflict of interests and consequently foresees a lot of new opportunities due to this dangerous growth policy of the top big three to five players. Medium-sized distributors will grow by smaller acquisitions, alliances and or joint ventures. Consequently the smallest ones, without any perspective and plans, will disappear.
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